When you’re running a business, it’s difficult to keep track of all its aspects. This is especially true when the business goes from being small to being medium-sized or large. When the business is small, chances are you’re going to be in touch with all your employees everyday. But as the business gets bigger, this type of everyday casual contact comes to an end.

Instead, the entrepreneur is only likely to be in touch with upper management and those people will be in touch with other people in their team. There might be a number of levels, depending on the size of the business.

Losing Track of the Money Stream

When this kind of distance is created between the upper echelons and the lower ones, it’s easy for the entrepreneur to lose track of what’s going on, especially when it comes to the money stream. For example, who’s doing all your purchasing? Who’s making decisions about raw materials, production, salaries, consultants, marketing campaigns etc.?

Developing a Product vs. Marketing

As an entrepreneur, you need to consider two basic things: how much money your company is spending on various things and whether you’re still maintaining the quality levels that you want to maintain. Is it possible that a lot of money is being spent, not in actually creating a great product but in marketing it? That would probably not be in keeping with what you intended to achieve with your company.

Salaries and Bonuses vs. Company Growth

Additionally, we’ve all heard of companies that maxed themselves out by paying their CEOs and other people in management positions very high salaries and bonuses even when there really wasn’t that much money coming in. And this eventually led to their downfall.

The people you hire are the lifeblood of your company. So you want to keep them happy. But it shouldn’t be at the cost of other employees in lower positions. Neither should your salaries be so big that they’re taking away the money that should be going back into developing the company.

Contact us to learn more about common business accounting mistakes and how to avoid them.